Due to recent COVID-19 Pandemic on 1 July 2020 Fast Delivery Ltd decides to lease trucks from Cool Finance Ltd. The term of the lease is 20 years. The implicit interest rate in the lease is 10 percent. It is expected that the trucks will be scrapped at the end of the lease term. The fair value of the trucks at the commencement of the lease is $2,000,288. The lease is non-cancellable, the trucks returned to Cool Finance Ltd at the end of the lease and requires a lease payment of $255,000 on inception of the lease (on 1 July 2020) and lease payments of $205,000 on 30 June each year (starting 30 June 2021). There is no residual payment required.

Required

1.1 Discuss the reasons why has the leasing standard been changed? What has changed? Are there any exemptions? (5 marks)

1.2 Prepare the journal entries to account for the lease transaction in the books of Fast delivery Ltd as at 1 July 2020. (4 marks)

1.3 Prepare the journal entries to account for the lease transaction in the books of Cool Finance Ltd as at 1 July 2020 (6 marks)

1.4 Prepare the portion of the statement of financial position (balance sheet) for Fast delivery Ltd relating to the leased asset and lease liability for the years ending 30 June 2021 and 30 June 2022 (as comparative figures). (2 marks)

1.5 Provide the journal entries in the books of Fast delivery Ltd for the final year of the lease (that is, the entry in 20 years' time). (5 marks)

1.6 Provide the journal entries in the books of Cool Finance Ltd for the final year of the lease (that is, the entry in 20 years' time) (3 marks)